Second U.S. Bitcoin Futures ETF Makes Lower-Profile Debut

  • In Business
  • 2021-10-22 20:42:32Z
  • By Bloomberg

(Bloomberg) --

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The second futures-backed U.S. Bitcoin exchange-traded fund made a slightly less conspicuous debut than the launch of the first such investment product three days ago.

The Valkyrie Bitcoin Strategy ETF -- trading under the ticker BTF -- fell 2.8% from its inception price of $25 Friday. More than 3.1 million shares worth about $78 million changed hands during the session. Bitcoin, meanwhile, pared an earlier advance to fall as much as 4.3% to $60,011. The largest digital currency reached an all-time high of just under $67,000 on Wednesday.

"There does seem to be a first mover advantage that plays out," said Stephane Ouellette, chief executive and co-founder of FRNT Financial Inc., a crypto-focused capital-markets platform, citing the Canadian crypto ETFs as an example. "I wouldn't intuitively think that the performance of the next one or one after is all that important from the perspective of the milestone for the asset class."

The bar was high for Valkyrie after the Tuesday debut of the ProShares Bitcoin Strategy ETF (ticker BITO), which ranked as the second-busiest launch ever, taking assets in the fund over $1 billion in just two days.

"I think BITO stole its thunder -- this was a much quieter launch." said Steve Sosnick, chief strategist at Interactive Brokers.

The field could get crowded quickly: VanEck's pending Bitcoin Strategy ETF (ticker XBTF) could come to market as soon as next week, carrying a management fee 30 basis points cheaper than the ProShares and Valkyrie funds.

"The market can handle a lot of different issuers' products and we very much welcome the competition -- obviously, we're coming in second to market here but we're very excited," Leah Wald, Valkyrie Funds CEO, said in a Bloomberg Television interview Thursday, adding "we wish our competition luck."

Booming demand has quickly become a problem for BITO, which is bumping up against the limit on the number of front-month futures contracts it is permitted to hold by the Chicago Mercantile Exchange, according to data compiled by Bloomberg. That could be a potential issue for Valkyrie's fund as well, which also holds short-term Bitcoin contracts. The ProShares fund fell for a second consecutive trading session, dropping roughly 3% Friday.

The U.S. Securities and Exchange Commission allowed the futures-focused ETFs to go forward after Chair Gary Gensler said they provided significant investor protections. The agency has rejected all applications for funds investing directly in the world's largest cryptocurrency.

Still, some market-watchers say the crypto ETF industry could buck the trend when it comes to being first to go to market.

"In the past, when you had ETF launches, first-mover advantage was very sizable," Matt Forester, chief investment officer of Lockwood Advisors at BNY Mellon Pershing, said by phone. "This area may be so new that it might take some time to sort that out."

(Updates prices throughout)

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